Corporate Bond Issuance and Trading. As a member of the BofA/Merrill Lynch corporate bond origination team, you are working on an upcoming transaction on behalf of Western Digital Corp. (Nasdaq: WDC) which is planning a massive high-yield bond offering to fund the acquisition of SanDisk Corp. (Nasdaq: SNDK). As the senior financial analyst on the deal, you are in charge of all the fixed-income analysis and report directly to the lead banker. A lot is on the line for your company because this deal might become the largest high-yield bond offering in 2016.

Here is recent press coverage of the announcement of the bond

offering:

Western Digital Readies $5.6B Bond Offering Backing SanDisk Buy7

year us

Western Digital this morning launched o the shadow calendar its

SanDisk acquisition bond financing, comprising $1.5 billion of seven-year

(non-call three) secured notes and $4.1 billion of eight-year (non-call three)

senior notes, according to sources. Roadshows are scheduled to run Monday,

March 21 through Monday, March 28, with pricing to follow via a Bank of

America-led bookrunner team, the sources added.

While first call premiums have not been outlined for the two

series, take note that while par plus 75% coupon to balance the short schedule

is most typical, an issuer-friendly arrangement at par plus 50% coupon has

become more acceptable over the past year. Beyond that, market sources relay

that the equity-clawback feature on both tranches is most typical, as

three-year for up to 35% of the issue, at par plus coupon, and the

change-of-control call provisions are also regular-way, at 101% of par.

Additional bookrunners on the long-awaited e

ort are J.P. Morgan, Credit Suisse, RBC, and HSBC. Proceeds, along with those

from a TLA, TLB, and an RC draw, will be used to back the $19 billion

acquisition of the rival storage-technology company, and issuance is under Rule

144A for life.

As reported, the company has guided the $4.2 billion U.S. dollar

TLB, and $550 million-equivalent, euro-denominated TLB at L/E+450{475, with a

0.75%

foor and OID of 98.5. The seven-year, covenant-lite term debt

will include 12 months of 101 soft call protection, and at current guidance the

term loan would yield roughly 5.64-5.9% to maturity.

Take note that the same bank line up is arranging the loans but

J.P. Morgan is the left lead. A planned $3 billion, five-year A term loan has

been increased to $3.75 billion, with pricing set at L+200. Western Digital

also plans to draw down a portion of its $1 billion, five-year revolver at closing.

Issuer ratings have firmed at BB+/Ba1/BB+. The secured debt is

rated BBB+/Ba1/BBB+, with a 2L (lower end of substantial, 80-90%) recovery

rating from S&P's. The unsecured debt is rated BB+/Ba2/BB+, with a 4L

(lower end of average 40-50%) recovery rating.

Irvine, Calif.-based Western Digital makes hard disk drives,

solid state drives, and cloud-network storage solutions, with a client focus on

set-top boxes, printers, in-car navigation devices, and other general consumer

electronics. Milpitas, Calif.-based SanDisk makes solid-state drives and other

storage solutions with a client focus on computers, tablets, phones, and

wearables. (March 18, 2016)

Your staff has also prepared market information and data for you

in addition to internal reports and numbers. Important background information

can be found in Calamos Investments, High Yield Market Review and Outlook,

March 2016, Guggenheim Investments, High-Yield and Bank Loan Sector Outlook,

February 2016, and Springsted Advisors (20160328), US Interest Rates. Other

useful market-data resources for pricing and benchmarking are the ICE BofA US

High-Yield Index Option-Adjusted Spread (BAMLH0A0HYM2) available from The St.

Louis Federal Reserve Bank at https://fred.stlouisfed.org/series/BAMLH0A0HYM2

as well as the constant maturity 7Y and 10Y UST rates at

https://fred.stlouisfed.org/series/DGS7

and https://fred.stlouisfed.org/series/DGS10.